SINGAPORE, Nov 20 (Reuters) - Brent crude traded above $111a barrel on Tuesday, less than a dollar off a one-month high hitin the previous session, on hopes a U.S. budget crisis will beaverted and on supply worries triggered by tension in the MiddleEast.

Global stock markets and commodities rallied on Monday,boosted by expectations for U.S. lawmakers to reach a deal toavert $600 billion in tax increases and spending cuts due tostart in January - the "fiscal cliff" that threatens to send theU.S. economy back into recession.

Oil prices found additional support from the growingIsraeli-Palestinian conflict.

"The overnight rally in the U.S. equity market is stillsupporting the oil market, with ongoing tension in the GazaStrip posing some geopolitical risks," said Natalie Rampono, acommodity strategist at ANZ.

"Even though the violence is not near oil-producing nations,the consensus is that it could lead to tension in the region ...so I'm surprised that prices haven't rallied like they did inthe past."

Big armoured bulldozers with blades tall enough to ploughthrough houses and carve a path for tanks and infantry werelined up on Israel's border with Gaza on Monday, ready to invadeif given the order.

Investors are waiting to find out if it will be truce orwar. Mediator Egypt says a deal to end the fighting could beclose. Israel says it is prepared to move troops into Gaza butprefers a diplomatic solution.

Optimism that debt-laden Greece will get more funding alsohelped brighten the outlook for oil demand, but price gains werechecked as the euro fell after rating agency Moody's strippedFrance of its prized triple-A rating.

A stronger dollar makes commodities priced in the greenbackless appealing to holders of other currencies.

"While there was not much news to trigger the rally, thereare a lot of nervous investors who are underweight equities andother risk assets," Ric Spooner, chief market analyst at CMCMarkets said in a note on Tuesday, referring to Monday's rally.

"Investors in this situation are very conscious of thepositive event risk represented by a good outcome on the fiscalsituation and the Greek government being successfully funded. Inthis situation, rising prices themselves attract investorsnervous about missing out on a major rally."

Euro zone finance ministers will give a tentative go-aheadfor the disbursement of 44 billion euros in emergency loans toGreece on Tuesday, but the money will only be paid on Dec. 5 ifthe country meets all remaining conditions.

"Finance ministers will talk about the Greek debt today andthat's going to create choppiness in the market," Rampono said.

"Oil prices are very macro driven at the moment, so we'relikely looking at prices to trade sideways."

Finland's finance minister said on Tuesday she was unsurewhether euro zone finance ministers would approve Greece's nextloan tranche at a meeting later in the day.

U.S. DATA

Promising data from the United States, the world's top oilconsumer, also helped keep oil prices near the peak reached inthe previous session.

U.S. home resales rose in October and a gauge of homebuildersentiment climbed to a six-year high in November, signs ofsurprising vigour in the country's still-struggling housingmarket.

Traders are now eyeing U.S. oil inventory data. A Reuterspoll of analysts showed U.S. crude oil stockpiles were expectedto have risen by 900,000 barrels in the week to Nov. 16.